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Helping A Special Needs Client Yields Business For Life

By combining patience and compassion with your professional expertise, you can help families care for their special needs children while opening up a potentially lucrative market for your practice. From my experience on both sides of this issue, here are answers to some of the questions I am most frequently asked about providing for children with special needs:

Question: How can a trust serve a client with a special needs child?

Answer: If your client has responsibility for a special needs child (SNC) – or any individual with special needs – he may not know that as long as the child owns or controls as little as $2,000, that sum of money will prevent him from getting future government support for such necessities as food, clothing, health care and shelter. Worse, the government can come back and ask for the cost of these services to be repaid! Can you imagine the disaster that will happen when the government asks for its money back and there is no advocate and your client is deceased? A competently drafted Special Needs Trust (SNT) will prevent this.

In addition to necessities, the SNT will provide funding for items that government programs do not, everything from toothbrushes to television, computers and recreation. For example, in the SNT and letter of intent I have for my son, I’ve outlined that the trust will fund trips to Disney World, and will provide funding for his other interests.

The wording of an SNT must be carefully crafted and exact in what is to be provided and what is not. This is where it is so important to include a competent and experienced attorney in the process.

Question: Where does life insurance come into the picture?

Answer: New or existing life insurance policies are an effective way to fund the testamentary trust at some future time. You should apply for the life insurance as soon as you think the client recognizes it’s the best funding method for the trust. But do not rush the process! It’s not unusual for the process to take up to a year. Why? Because every parent of an SNC thinks their child will be cured, that there will be some magic pill that will make everything will be in some form of denial. Do not take away their hope! Be patient and you will be rewarded.

A second-to-die policy is very cost effective. They tend to involve insurable interest parties other than the parents. Often, the insurance is funded by grandparents or other family members who may be in a better financial situation than the parents and who have a deep, emotional desire to help. If economics is an issue, use convertible term, but make sure the policy is converted within the contract period and that the term can be converted to a second-to-die policy.

If using universal life, make sure you also use the guaranteed death benefit, no lapse rider. But do this carefully and get a signed statement to protect yourself so that your clients understand they must make the required premium payments on time to avoid a future lapse. Other policies from other “insurable interest” parties can be used. Pensions, individual retirement accounts, annuities or investment accounts are all means of funding a testamentary trust. Sometimes the attorney may be creative in funding the trust. I know of one instance where a very valuable antique car was used to fund a trust.

You must be very careful that the wording of the beneficiary on the policy is the same as the SNT (for example, the Special Needs Trust for Joseph Smith).

Be careful of the ownership of the policies, as it could affect estate taxes down the road. Sometimes it’s necessary to have the life insurance owned by an Irrevocable Life Insurance Trust (ILIT).

Question: What about long-term care insurance?

Answer: Long-term care insurance also can and should be part of the plan. If the parents’ long-term care needs are not covered, it could result in a future depletion of the needed assets for the Special Needs Trust.

Question: What needs to be done in order to create a Special Needs Trust?

Answer: The most crucial step in all of this is for your client to have his own written will. Also, make sure the beneficiary on the policies and contracts reads exactly as it appears in the SNT and estate documents (e.g. The Special Needs Trust for Joseph Smith). You must make sure that the asset used to fund the trust is stable at the time it is needed and not subject to volatile market conditions. Guaranteed death benefits and cash value riders on variable annuities are mandatory to avoid this problem. A solid, knowledgeable, financially astute and stable trustee is also a paramount need. Have contingent trustees, custodians and guardians, in case someone can’t serve.

Question: How do you help your client prepare a letter of intent?

Answer: While not a legal document, the letter of intent it gives guidance to future guardians and trustees as to how the parents would like their special needs child to be treated after they have passed on. Be sure to review this with the team.

A letter of intent is used to express the parents’ wishes; it is not an enforceable agreement. If it were enforceable, it would take away the discretionary nature of the special needs trust. A letter of intent includes instructions to the trustee and guardian regarding the type and level of care your client would want to have provided.

Question: What is the best way to avoid problems with a trust?

Answer: The best way for your client to avoid a trust pitfall is to be careful about choosing the members of the trust team: attorney, certified public accountant, financial professional, trustee and a needed advocate and guardian. Have contingents in these areas. Make sure these parties have agreed to serve and are familiar with your client’s documents and intent. The client will need to participate in joint meetings with all parties. Do a regular review with all. Sometimes a letter of intent will help clarify your client’s wishes, which cannot always be detailed in a trust document. While it has no legal basis, it gives the parties involved more detailed information on the client’s desires and wishes for his beneficiaries.



The Special Needs Trust market can be lucrative for you, both financially and emotionally. Very often, it will result in multiple ongoing sales. But I caution you, do not rush the process. Remember to do a detailed fact finder. When you formulate the plan, you must meet with all members of the team and the extended family with permission and input of the parents.

There is peace of mind for the family and great satisfaction for you in the wonderful and noble humanitarian service you have provided. You can make the special needs child’s life more worthwhile and help him reach his full potential. Wouldn’t you want this for your child?

George R. Shadie, AEP, CLU, an agent with New York Life in Wilkes-Barre, Pa., is the parent of a special needs child. In his role as an advisor and a concerned parent, he has made numerous presentations on special needs trusts to various professional organizations representing insurance advisors and autism advocacy groups. Contact him at [email protected] [email protected].

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